A recent report published by Bankrate suggests that younger millennials aged 18 to 26 spend more on daily, habitual expenses, such as eating out, coffee, and alcohol, than any other generation, which can limit their long-term ability to save for a downpayment on their mortgage.
According to the data, 54 percent of the people in their age group say they have a meal away from home at least three times per week, compared to the 33 percent of Gen-Xers. Thirty percent say they buy coffee at least three times a week. Fifty-one percent of younger millennials aged 21 to 26 (for legal reasons) said they go a bar at least once a week.
Millennials also have another problem that previous generations didn’t face: soaring student debt. Cumulative student loan debt has reached $1.3 trillion dollars in the U.S., and college tuition continues to rise each year. Coupled with a trip to the neighborhood watering hole, a week’s worth of morning coffee, and lunch out on the town, where will millennials find the time—and the money—to save for a downpayment?
One option, aside from completely cutting off vice spending and tightening the belt, is the rise in popularity of low-down payment mortgages, which are now offered by major banks such as, Bank of America, Wells Fargo, and Fifth-Third. Veterans and active-duty service members can get a private loan guaranteed by the Department of Veterans Affairs, and the Navy Federal Credit Union offers a zero-down mortgage option.
Millennials that aren’t in the military but have impeccable credit can qualify for low down payment mortgages with mortgage insurance, either through a private firm or through the FHA. The Chicago Tribune has reported that nearly 35 percent of millennials that opted to go the route of homeownership did so using FHA mortgages, which is 14 percent higher than the overall market share, which sits at 21 percent.